Success & the City

Ivan Bofarull looks at the role of cities in attracting and developing scarce human talent

In a world where connectivity and complexity are the rule, the definition of risk is turning global – a financial downturn or issues concerning health or global terrorism are just a few among a number of examples.

One of the major risks we are starting to foresee in the road ahead, according to the Boston Consulting Group, is a massive talent gap. Populations in most of the developed world are ageing at unprecedented rates, heading to a sort of “japanisation” of demographics.

On top of this trend, educational systems across the world seem not to be delivering the abilities that are necessary in an era that some, like Erik Brynjolfsson and Andrew McAfee, call the “Second Machine Age”.

The debate on the role of machines (robots, algorithms and all sorts of computation) and their impact on the future of the workforce has two clearly opposed alternatives: either machines will replace the human workforce or they will complement us and dramatically boost productivity by “augmenting” our capabilities.

But, what if both alternatives happen simultaneously?

What if machines and algorithms were both replacing routine jobs (even middle-skilled cognitive routine jobs) yet at the same time were facilitating augmentation and exponential growth in creative non-routine jobs?

With opposing trends going on, demand for highly skilled talent will go up while demand for middle and low-skilled jobs will go down.

And there is still more: what if we were entering an era where innovation, and thus the creative deployment of human capital, was replacing financial capital as the engine of prosperity and growth?

For a number of reasons, therefore, it is very likely that the competition for highly skilled talent is going to intensify in the coming years.

But, where do we envision this to happen? Are countries going to compete against each other by unleashing increasingly attractive immigration policies in an uncertain world with massive security risks?

Are multinational corporations going to become sustainable magnets of talent in a world of emerging platform-based and start-up ecosystems?

The McKinsey Global Institute has identified “urbanisation” as one of the four major disruptive forces to come and a number of studies led by Richard Florida at the Martin Prosperity Institute (University of Toronto) in Canada have pointed out in the last few years that we are seeing the eruption of a creative, connected, highly talented global class that is increasingly urban because cities – and more specifically dense cities – are the places where serendipity happens and chances for innovation multiply.

In some ways, globalisation has already favoured the accumulation of talent and resources in specific hub cities or global nodes that are becoming increasingly influential in the realm of global policies.

Consider, for example, the relevance of the City of London, Wall Street or Hong Kong when it comes to regulations affecting financial markets.

In a highly probable confluence of global talent gaps and an increasing relevance of cities, we will very likely see these cities, ahead of countries or multinational corporations, aggressively competing in the global arena for highly skilled talent.

But a question looms: how can we provide tools that are actual, actionable metrics with which cities can compare to each other on their potential to attract global, highly skilled talent?

Among a number of potential metrics, we decided to start by picking up just one: international students enrolled in top full-time MBA programmes. (See Box page 51.)

We may be missing a lot but we may have also found some virtue in keeping it simple and easily comparable.

First, global MBAs are an almost fully mobile population of individuals who make extremely relevant choices for their lives and household finances, and… they pick up locations! As The Economist has noted, when it comes to deciding which MBA programme to choose, international prospective students basically narrow their choice by considering programme reputations (in other words, global rankings) and locations (for most of them, the city’s global brand).

These metrics help them narrow the frame and set a shortlist of programmes and then they are able to drill down based on further considerations (scholarships, programme-specific curriculum, faculty and so on).

Our fundamental assumption is that the international population enrolled in top MBA programmes can be a predictor of a city’s or region’s ability to attract highly skilled global talent.

Furthermore, we see a great opportunity for local governments to tap into the opportunities that this platform of global talent has to offer. At the very least, MBAs live in the city or regional ecosystem for a full year or two years in most cases.

Can we imagine just how much potential cities or regions are missing by not engaging them in a collaborative way to solve local problems?

Or can we imagine just how much potential cities or regions are missing by not engaging them once they graduate, regardless of their next destination, be it to stay in the city or move somewhere else?

Because it is not only what global MBAs can do while they stay in a city but the number of decisions they will potentially take in the future that may benefit the city (for example, location of future investments, branches, research centres, campuses and so on).

In 2015, the Kauffman Foundation released a research study into the impact of immigrants on the American entrepreneurial ecosystem and found that 40% of Fortune 500 founders were either foreign born or “second generation” immigrants.

And this trend seems likely to continue in the future. The same Kauffman Foundation research also found that as many as 24 out of the top 50 venture-backed start-ups in the US have at least one foreign-born co-founder.

Although we may consider this a US-only phenomenon, similar findings apply to a global European city such as Barcelona: 40% of Wired magazine’s hottest start-ups in this city in 2014 have a foreign-born founder.

These percentages of foreign-born entrepreneurialism seem to clearly surpass what would be an average or median percentage of international employees in global corporations or in the general population as a whole in key locations worldwide.

However, there is a caveat in these numbers and the underlying assumption: although foreign-born talent seems to be imbued by a special entrepreneurial energy, it is not clear that MBAs have such an inspiration.

Inc magazine found that MBAs are not a majority among co-founders but they may be instrumental in making start-ups successful when they are hired for the management team. The Financial Times recently found that between 80% and 100% of start-ups where MBAs were putting some skin in the game were still operating after three years, which is a very high ratio of success for an average start-up.

MBA City Monitor 2015 findings

This article is informed by the second edition of ESADE’s MBA City Monitor (the previous edition was in 2013).

The MBA City Monitor ranks metro areas by the international population enrolled in top full-time MBA programmes (ranked by The Financial Times). It also releases a list of metro areas ranked by the same population of global MBAs relative to total population; finally, it also ranks countries.

The Boston area in the US, with an almost unrivalled ecosystem of leading universities, business schools and research centres, has continued to top the list and we do not foresee any dramatic change in the years ahead, as it has a significant lead with respect to the second tier of cities: New York and Chicago.

More disputed is Boston’s leadership in the relative ranking of international MBA population per million inhabitants, where the so-called “Research Triangle” region in North Carolina is clearly a contender.

Interestingly, the San Francisco-Silicon Valley area has experienced the most significant growth (+21.5%) in its international top MBA population in the last two years, which may signal that global prospective students find increasingly attractive to study an MBA programme that may help them land a job on one of the tech giants or even have the chance to start up their own business and become the next winner-takes-all platform (with any of these alternatives replacing the old glamour of traditional investment banking and consulting firms).

The third tier within the top ten has cities such as London, Paris, Toronto, the Silicon Valley area and Barcelona.

Cities like Paris and Barcelona have extremely powerful cultural global brands associated with their legacy in arts, architecture and urbanism and also share being global brands that almost compete with their respective country brands, whose labour markets struggle with innovation and flexibility.

How could the global top MBA population in these countries contribute to revamping their innovation economies?

Could these or other local governments address specific policies to attract or retain this talent? Could local governments lobby to influence their respective countries with regard to immigration policies?

Could they put in place administrative policies that make life a little bit easier for the non-resident MBA graduates who want to stay and work or even start up businesses and recruit other MBAs or local talent? Could they engage this community of talented individuals in a way that could inspire them some day to come back and have an impact? These are only some of the questions that will prevail in the years ahead, as the global talent risk that some have identified shapes the potential of cities, regions, countries to thrive in the so-called “Second Machine Age”.

Global Focus is the EFMD Business Magazine that provides in-depth analysis and updates on international management development and features topical reports, thought-leadership and insight from leading experts from academia, business schools, companies and consultancies.

EFMD is a global, membership driven organisation, based in Brussels, Belgium with offices in Geneva, Hong Kong, Miami and Prague. The EFMD network includes nearly 900 institutional members and reaches over 25,000 management development professionals across 88 countries worldwide.